Terra Firma to take Infinis private again two years after IPO

Monterey Capital II, the holding controlled by Terra Firma that currently owns 68.5% of the business, has offered to buy the remaining Infinis shares in order to take the company private.

The acquisition will be funded by a debt facility from Goldman Sachs – it remains unclear at this stage whether or not Terra Firma will also inject additional equity to finance the deal.

Terra Firma listed portfolio company Infinis on the London Stock Exchange in late 2013, at 260 pence per share – the IPO valued the business at £780m. Terra Firma is now offering 185 pence to other shareholders, valuing the company at £555m, which still represents a 40% premium on the closing price prior to the announcement. Since the 2013 IPO and prior to the current deal, Infinis's share price had fallen by close to 50%.

The transaction will be implemented by means of a court-sanctioned scheme of arrangement. Infinis's board has recommended the offer, which is expected to complete by year-end.

In a statement, the GP insisted that the company had been "performing well at an operational level, and delivered on its dividend commitments". However, Terra Firma acknowledged that a gradual sell-down of the remaining investment would not bring satisfactory returns.

Factors cited by Terra Firma to explain the tumbling share price include a "challenging power price environment", as well as the fallout from the 2015 general election in the UK, which prompted a proposed removal of the support for new onshore wind capacity and the removal of the exemption from the Climate Change Levy for electricity generated from renewable sources.

Infinis did experience a significant drop in its share price at the end of June this year, tumbling from 201 pence to 140 pence in a matter of days. However, trading had already been on a downward trend since the IPO, with share price cut by nearly a quarter between November 2013 and June 2015.

Terra Firma now believes that separate sales of the onshore wind portfolio and the landfill gas assets are the best way forward to realise its investment, and will actively pursue this agenda once the acquisition completes.

Terra Firma was not available to comment at the time of publication.

Previous funding
Infinis was created when Terra Firma split portfolio company Waste Recycling Group (WRG) into two subsidiaries: waste disposal and renewable energy. Terra Firma bought WRG in 2003 for €836m and followed this investment with the €357m acquisition of the UK landfill business of landfill operator Shanks in the same year.

Terra Firma then merged the two businesses and sold off the waste disposal division for €1.4bn to Fomento de Construcciones y Contratas in 2006. The GP retained the renewable energy division, renaming it Infinis, and brought in a new management team, specifically a new CEO, CFO, commercial director and head of wind development.

Terra Firma is invested in Infinis via its £1.9bn Terra Firma II fund, as well as two co-investment funds.

In February 2013, Infinis announced an offering of £350m in senior notes, due to mature in 2019 and with a 7% coupon. The proceeds from the offering were used to repay the company's outstanding £275m in senior notes, which were due to mature in 2014 and had an interest rate of 9.125%.

Company
Infinis operates 137 power plants comprising landfill gas sites and onshore windfarms. It also has four onshore wind projects currently under construction.

Infinis is headquartered in Northampton. The company recorded turnover of £236m for the year ending March 2013, as well as EBITDA of £142.8m. At the time of the 2013 IPO, Infinis had posted revenues of £225m and EBITDA of £125m.

According to the offer statement, an operational and administrative restructuring of the business will be needed following the acquisition. "There can be no certainty as to the level of employee transfer and/or reduction that may result," the statement added.

People
Guy Hands is chairman and chief investment officer of Terra Firma.

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